Liberty and Laissez-Faire: A Primer on Freedom, Government, and Prosperity

By Steven Soderlind

With the election of Donald Trump as president of the United States of America, the relationship between laissez-faire and liberty is drawing renewed attention.

Steven Soderlind, an economist and professor emeritus at St. Olaf College in Northfield, Minnesota, delves into how the two are connected, emphasizing the critical role that economics and politics play in determining our liberty in this extended essay.

His goal is to encourage thoughtful reflection on government at a time when many associate liberty with minimal intervention. Find out what the past tells us about preserving and promoting liberty as well as the thoughts of venerable economists, philosophers, and critics such as Adam Smith, Thomas Robert Malthus, David Ricardo, Karl Marx, John Stuart Mill, August Friedrich von Hayek, Joseph Alois Schumpeter, Gunnar Myrdal, and Milton Friedman.

Throughout his analysis, Soderlind seeks to answer a key question: Is laissez-faire or government action the preferred route to liberty?

Join the author as he considers the advantages and disadvantages that laissez-faire brings to the quest for liberty and our continuing mission to form a more perfect Union.

• Language: English
• Publisher: Archway Publishing
• Release date: Apr 7, 2017
• ISBN: 9781480844056

Steven Soderlind

Steven Soderlind is professor emeritus at St. Olaf College, Northfield, Minnesota. During forty-some years of teaching, he specialized in urban and regional economics, the history of economic thought, and social choice. He also led international travel studies and taught across the curriculum in statistics, great works, and the history of science. He earned a bachelor of arts degree in mathematics and economics from the University of Minnesota and a Ph.D. in economics from the University of Massachusetts at Amherst.

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Copyright © 2017 Steven Soderlind.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

This book is a work of non-fiction. Unless otherwise noted, the author and the publisher make no explicit guarantees as to the accuracy of the information contained in this book and in some cases, names of people and places have been altered to protect their privacy.

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Interior Image Credit: Special Collections Research Center, University of Chicago Library.

ISBN: 978-1-4808-4404-9 (sc)

ISBN: 978-1-4808-4403-2 (hc)

ISBN: 978-1-4808-4405-6 (e)

Library of Congress Control Number: 2017903875

Archway Publishing rev. date: 3/29/2017

Dedication:

To the rising generation

CONTENTS

Preface

Introduction

CHAPTER 1 In a Nutshell

CHAPTER 2 Liberty, an Evolving Priority

CHAPTER 3 Numbers

CHAPTER 4 Play to Discover

CHAPTER 5 Liberty and Laissez-Faire in Classical Economics

CHAPTER 6 Liberty and Laissez-Faire in Neoclassical Economics

CHAPTER 7 The Planning Debate

CHAPTER 8 Critiques of Laissez-Faire

CHAPTER 9 Realities of Power and Influence

CHAPTER 10 Trends and Trajectories

CHAPTER 11 On Market Performance and Problems

CHAPTER 12 Social Goals

CHAPTER 13 Corrective Policy

CHAPTER 14 Reform and Repeal

CHAPTER 15 Mill on Justice, Taxation, and Inheritance

CHAPTER 16 The Welfare State and Liberty

Conclusion

Appendix – Biographies

Suggested Resources and Readings

Bibliography

PREFACE

This book invites readers to examine the relationship between liberty and laissez-faire against a backdrop of calls for less government intervention. As a primer, it introduces fundamental concepts and invites readers to think and decide for themselves.

Approaching liberty as a goal and government as a means, the discussion will emphasize social and historical context in the relationship between liberty and the size of government. It will incorporate the ideas of eminent economists and political thinkers, both advocates and critics of laissez-faire. In particular it will reflect on works by Adam Smith, John Stuart Mill, Friedrich Hayek, and Milton Friedman on the one hand, and Thomas Malthus, Karl Marx, John Steinbeck, and Thorstein Veblen on the other. Many readers will be surprised at the points of agreement and disagreement, left standing on grounds that readers are better served with unanswered questions than unquestioned answers. Wisdom often resides amidst competing dispositions.

The rising administration has indicated strongly that it will shake the foundations of public policy to make America great again. Hopefully this little book will help set the stage for a productive episode of shaping and pruning. Best not to throw out the baby with its bath water.

In the end, all social institutions - including government and markets - operate in a constitutional setting, subject to agreed authority and procedures. Constitutions and charters provide the key mechanisms for managing the dynamic fit of government with liberty and prosperity.

May this book prove useful in our pursuit of a more perfect Union.

Steven Soderlind

Apple Valley, Minnesota

December 2016

INTRODUCTION

I want government that is so small I can barely see it.

Rand Paul, 2016 presidential candidate

Hardy libertarians promote freedom and self-determination. They resent oppression, including slavery, abusive oversight, intrusive government, unwarranted discrimination, muscular opportunism, and confining ideology.

These days, especially in America, the libertarian view is tied to an optimistic vision of reduced government and free, unregulated markets, traditionally called laissez-faire. Proponents from Raul Ryan to Rush Limbaugh claim to have distilled this practical stand from respected economists, referencing the likes of Adam Smith, John Stuart Mill, Frederick Hayek, and Milton Friedman. They also take heart from astute reflections on Soviet communism associated with Ayn Rand, William Buckley, Jr., and Patrick Buchanan, to name a few.

So the matter for many is settled: liberty and laissez-faire complement and reinforce one another. But make no mistake, laissez-faire can also undermine liberty by tacitly condoning an oppressive status quo: human trafficking, racial and gender discrimination, monopoly, religious chauvinism, etc. Many see The Great Recession as a consequence of deregulation – toying with laissez-faire.¹ Thus a deeper examination seems in order.

The goal of this essay is to provide a relatively balanced account of connections between liberty and laissez-faire. It will highlight the views of eminent economists like Smith, Hayek, and Friedman, and add venerable critiques associated with Malthus, Mill, Marx, Veblen, and others. Many readers will be surprised at the complexities involved; even strident supporters of laissez-faire have harbored reservations.

A primer, this essay offers only an introduction. It surveys a vast territory, spotting grand features and encouraging deeper investigation. Hopefully readers will appreciate both the portrait and the prompts.

CHAPTER 1

In a Nutshell

L aissez-faire, leave things alone, generally disparages government intervention. It imagines a social milieu in which individuals and households operate without interference, hence the connection from less government to liberty. Left alone, individuals in their various circumstances can choose what to buy or do, when, where, how much, and with whom - as they see fit. Without governmental restrictions, laissez-faire seems to promote liberty and market prosperity.

Meanwhile we occupy a world of oppressive circumstances and predicaments: slavery, intimidation, overlords, xenophobia, persecution, monopoly, racial oppression, sexism, criminality, contaminated water, etc. Against that backdrop, laissez-faire can be an avenue of acceptance, complicity, and even support for the status quo, hardly the vanguard of liberty. How can we envision such complexity?

Figure 1 offers a Venn diagram of the social universe with two dichotomies: liberty versus coercion and laissez-faire versus government intervention. Liberty is portrayed as a circle, laissez-faire as an ellipse. The circle and the ellipse overlap, their intersection being Liberty and Laissez-Faire, our title.

Figure1.jpeg

Thus we imagine four categories of social circumstance:

• liberty and laissez-faire (medium gray),

• liberty and not laissez-faire (dark gray),

• not liberty and laissez-faire (light gray), and

• not liberty and not laissez-faire (white).

Consider the examples in Table 1.

Table 1.

These assignments are discussable. Placing the Bill of Rights in the category of "Liberty and Not Laissez-Faire," for example, appreciates that constitutional government came first, then the Bill of Rights to be enforced by that government.² One might also challenge whether legalized heroin, toying with dangerous addiction, belongs in the category of Liberty and Laissez-Faire. The rationale here is that legalization would remove a governmental restriction to allow free choice by adults.

It is easy to imagine more ambiguous situations, like following a boss’s orders (light gray or medium gray?), consumer protection (white or dark gray?), or buying meat subjected to mandatory federal inspection (dark gray?). Situations can be murky.

Systemic oppression, like racism or sexism, raises the question whether laissez-faire or government action constitutes the better course toward greater liberty. Among those who advocate laissez-faire, some will argue that a particular pattern of coercion is not sufficiently nasty to justify intervention, the cure being worse than the problem. Others will acknowledge unwelcome power and injustice, but argue that laissez-faire promotes social processes that will eventually overcome oppression. Milton Friedman represented this view in Capitalism and Freedom. To wit,

I believe strongly that the color of a man’s skin or the religion of his parents is, by itself, no reason to treat him differently; that a man would be judged by what he is and what he does and not by these external characteristics. I deplore what seem to me the prejudice and narrowness of outlook of those whose tastes differ from mine in this respect and I think the less of them for it. But in a society based on free discussion, the appropriate recourse is for me to seek to persuade them that their tastes are bad and that they should change their views and their behavior, not to use coercive power to enforce my tastes and my attitudes on others.³

Thus Friedman counseled patience and open discussion to deal with racial and religious bigotry.

Impatient with this approach, social activists point to enduring patterns of oppression for which hands-off policies and respectful discussions have not borne fruit. Laissez-faire to them abets established oppression and coercion: white supremacy, sexism, ageism, homophobia, family violence, and police brutality. If liberty enjoys priority, how long must people wait for progressive dispositions to take hold?

Friedman imagined free markets as a vanguard of liberty, taking heart in what he called unanimity and nonconformity.⁴ He also argued that racial and gender oppression might succumb to the liberating influence of impersonal markets, as it had for Jews in anti-Semitic Europe.⁵ Though he was personally opposed to racial and religious discrimination, Friedman preferred not to use coercive power to enforce my tastes and attitudes on others. But as history unfolded, the Civil Rights Act of 1964 came just two years after Capitalism and Freedom, acknowledgment that America’s foundation of white male supremacy persisted stubbornly in spite of market forces and open debate. The nagging question was whether a white person would willingly change places with a person of color in the United States even fifty years hence.⁶

To a libertarian, the balance of genuine social gain comes with reduced oppression. But even with the intervention of executive orders, laws, and court rulings, the fight for harmonious liberty (the medium gray kind) remains an uphill battle. Racism, sexism, religious chauvinism, etc., are deeply rooted, resilient features of complex society. To the extent that people gain pleasure or profit from oppressing others, expect resistance to political correctness. Change will come slowly, the dark gray increment of liberty being tarnished by the coercive imposition of government. In this sense the Confederate flag often emerges in protest of political correctness that marches under the American flag with constitutional accreditation.

Thus we come to the heart of the matter: is laissez-faire or government action the preferred route to liberty? Relative to our Venn diagram, the Circle of Liberty can grow in its medium gray realm of Laissez-Faire or in its dark gray realm of Not Laissez-Faire. That is, liberty can expand with growing brotherhood among racial or religious groups (medium gray), or liberty can expand with anti-discrimination laws, court decisions, and executive orders (dark gray). Proponents of liberty must wonder about dark gray, appreciating that the success of intervention will depend on cultural and historical circumstances, including tolerance.

In a nutshell, given its high priority, how should liberty grow and prosper? If gains in liberty seem barred in laissez-faire, should they be cultivated, imposed, or legislated into Liberty and Not Laissez-Faire?⁷ Both laissez-faire and government intervention can expand liberty, but both can also trample it. Thus we confront the Yin and Yang of libertarian aspiration.

CHAPTER 2